Criminal charges coming against former Dewey top managers

Almost two years after law firm Dewey & LeBeouf filed for Chapter 11 protection under the Bankruptcy Code, criminal charges against three top managers of the failed firm are expected to be unsealed as early as March 6.

Former executive director Stephen DiCarmine and two others whose identity the Wall Street Journal could not confirm are expected to be charged with alleged fraud relating to the firm’s collapse. The charges will be announced by the Manhattan district attorney's office and the Federal Bureau of Investigation.

In addition, the Securities and Exchange Commission (SEC) could also pursue civil charges against managers at the failed firm, although SEC officials did not comment on any pending charges to the WSJ.

Former creditors of the firm are expected to go after select top executives as well after U.S. Bankruptcy Judge Martin Glenn ruled in November 2012 that unsecured creditors have standing to sue for damages. Although many former Dewey managers are safe from prosecution due to a $71.5 million clawback agreement from October 2012, DiCarmine, former chairman Steven Davis, and former chief financial officer Joel Sanders were notably absent from the agreement.

However, Davis has already paid his penalty to the firm’s estate in connection with the bankruptcy. In May 2013, Davis and Dewey’s insurance company, XL Specialty Insurance, agreed to pay a combined $19.5 million settlement to be absolved from mismanagement claims. Most of that money will go to Dewey’s creditors.

Shortly after the firm’s collapse in 2012, former Dewey partner Henry Bunsow also sued a number of the firm’s management team, including DiCarmine, for what he claimed was “a Ponzi scheme in order to enrich themselves and select partner of the Firm.” He also claimed that the management team misrepresented Dewey’s financial performance and stability in order to attract partners at other firms.

For more on what has happened with Dewey until this point, check out these IC articles: